Site Loader

Micro Level
There have been attempts to construct internationalization indices, reflecting features
such as the structure, activities, and evolution of firms overseas. For example, the United Nations Conference on Trade and Development (UNCTAD) constructed the Transnationality Index as a synthetic measurement on international operations of multinational enterprises24. It combines the share of foreign assets in total assets; share of foreign sales in total sales; and share of foreign employment in total employment, with equal weights to reflect the spread of the firms’ businesses in overseas markets.
However, internationalization is much more complex than can be encapusulated in a single index, thus other measurements tend to adopt a discrete or mixed approach combining quantitative and qualitative elements. The most comprehensive so far is the measurement by Dunning and Lundan. They use seven indicators to capture the internationalization of a firm25:
1.the number of foreign markets involved;
2.the number and revenue of foreign affiliates;
3.the proportion of foreign assets, sales, profit orstaff of the firm;
4.the proportion of foreign ownership ormanagement in the firm;
5.the value of R;D conducted abroad;
6.if the firm controls international networks; and
7.the extent the management of the firm isdevoted to foreign affiliates.

While the above measurements are constructed for multinational enterprises, they can be adapted for SMEs. For instance, instead of looking at foreign affiliates, the indicators could look at the number of SMEs being subcontractors to foreign companies and/or having foreign subcontractors. Instead of value of R;D conducted abroad, the indicators could reflect the extent of SMEs’ participation in joint ventures, licensing and franchising arrangements.
Macro Level
Ideally, the macro level measurement of SME internationalization should be an aggregrate of the data at the micro level. Taking into consideration the different forms of SME internationalization and micro level measurements, the following indicators
would be able to present a valid picture on the stage of SMEs internationalization26.
1.number of SMEs exporting directly and valueof SMEs’ direct exports;
2.number of SMEs importing directly and valueof SMEs’ direct imports;
3.number of SMEs investing abroad and value ofSMEs’ investment abroad;
4.number of SMEs being subcontracted byforeign enterprises and value of sales of SMEsbeing subcontracted by foreign enterprises;
5.number of SMEs subcontracting foreignenterprises and value of purchase of SMEsfrom foreign subcontractors;
6.number of SMEs cooperating with foreignenterprises under joint ventures, non-equityalliances, licensing and frenchising and valueof SMEs’ revenue from cooperation withforeign enterprises.

However, most statistical agencies do not collect or even if they do, collect minimum SME-related data. In many economies, only basic data on the number of SMEs and SMEs’ economic contribution is collected, while data on SMEs’ involvement in international trade, investment, and cooperation, is scarce.
To measure SME internationalization, two feasible options are suggested, namely: 1) by economic surveys; and 2) by census.
1)Survey Approach
The European Commission conducts an assessment on internationalization of European SMEs every three years using a survey approach. For the most recent 2010 report on Internationalization of European SMEs, the European Commission conducted 9,480 extended interviews based on a disproportional stratified sample (Appendix 1). The study found that a considerable number of European SMEs were engaged in international activities. Although exporting and importing were still the most prominent activities, European SMEs were also actively engaged in technological cooperation, subcontracting with foreign enterprises, and foreign direct investment in overseas markets27.
2)Census ApproachJapan utilizes the results from an Economic Census in an effort to understand SMEs’ internationalization activities. The Economic Census consists of two sub-censuses, namely: 1) Economic Census for Business Frame identifies the basic structure of establishments and enterprises; and 2) Economic Census for Business Activity identifies the situation of economic activities of establishments and enterprises. Each census is conducted once every five years by the Japanese Government, with the help from prefectural municipal governments and enumerators. The results are then reflected in the White Paper on SMEs in Japan. For example, the White Paper on SMEs in Japan 2014 utilized the results from the Economic Census for Business Frame in 2009 and the Economic Census for Business Activity in 2012, and captured the overseas expansion by Japanese SMEs in these three dimensions: 1) direct exports, 2) indirect exports28, and 3) direct investment. It also provided valuable data on SMEs’ business cooperation with foreign enterprises.
Measuring SME Internationalization in APEC
The APEC SME Working Group has been discussing ways to improve SME access to markets and promote SME internationalization since its inception in 1994. They had addressed the issue of barriers to full participation of SMEs and micro enterprises in international trade/markets within APEC in their Strategic Plan 2009-201229. In their current Strategic Plan 2013-2016, one of the priority areas is on addressing the critical issues pertaining to the strengthening of the business environment, market access and internationalization of SMEs.
In 2013, in order to measure the progress of implementing the Strategic Plan 2013-2016, the members of the working group agreed to collect APEC SME Monitoring Indices, covering all priority areas of the Strategic Plan 2013-2016. In the area of internationalization, members agreed to use the percentage of SMEs’ contribution to exports (i.e. SMEs’ share in total exports) and the number of SMEs making direct investments abroad (i.e. percentage of SMEs investing abroad in total

Post Author: admin